Stay Away from Bloated Penny Stocks

Bloated Penny Stocks. What are they? Well, in the penny stock world, we call any stock that has a huge amount of authorized shares or outstanding shares a bloated penny stock. Alright. Now that you are familiar with the definition of a bloated penny stock. What should you do if you come across one? I recommend that you simply just stay away from bloated penny stocks.  These stocks are not easy to make money on.

The reasoning behind this is somewhat complex, so I will go ahead and bring in a little help from out Ultimate Guide on Penny Stocks to answer this question in more detail. This ultimate penny stock guide can be found right here:  How To Invest In Penny Stocks For Beginners.

Stay Away from Bloated Penny Stocks

What do I mean by Bloated Penny Stocks you may ask? This basically mean’s that the share structure of a penny stock is over saturated with the amount of shares that the company is allowed to sell and introduce into the markets. I am of course talking about the Authorized Share (AS) Structure of a stock (I will explain more on this later – via the Golden Penny Stock Tips).

Stay Away from Bloated Penny Stocks - LearnedGold.ComI will give you an example.  Let’s say that there is a penny stock out there (lets call it Penny Stock Alpha) that is currently trading for $.0020 per share, and this stock has an AS of 500 Million shares.  Now, on the other end is a penny stock #2 (let’s call it Penny Stock Beta) that is also trading for $.0020 per share, but has an AS of 5 Billion. You might have an idea of where I am going with this already. If you might have guessed it, the Beta Penny Stock is the bloated one out of the two. It is much easier for a penny stock to move quickly and much easier for the float to get locked down (more on this later – via the Golden Penny Stock Tips) on a 500 Million AS stock, than it would be on a 5 Billion AS stock. 

Think of it this way, if the Alpha stock gets a ton of attention and a huge amount of people buying up all of the shares after some amazing news (example news:  $150 Million dollars in funding has been received for a new product), but nobody is selling any shares (because the expectation is that the stock will keep gaining momentum), the stock just keeps going up and up and up.  Now imagine the same news comes out for the Beta penny stock. It would take a lot more buyers and a lot more money to buy up all of the shares for this particular penny stock as there are just too many shares out there to trade.

All of this might sound somewhat confusing to you right now, but it all makes sense if you had access to and an understanding of L1 and L2 Quotes(more on this later – via the Golden Penny Stock Tips).

If you like what you see here on this “Stay Away from Bloated Penny Stocks” page, please go ahead and visit our Ultimate Penny Stock Guide to get more information on like topics. Penny Stocks are a complicated beast. If you truly want to learn how to trade them well, then please do your due diligence and learn how to master penny stocks.

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